Buying Out of State - Newbie
Staten Island, NY · Member since 2015 · 265 posts · 59 votes
Hello all, I am a newbie here and would like to know what steps I should take when investing out of state. Thank you.
Welcome, Eric!
I am in California, and believe it or not, I invest in Harrisburg metro. I'd say it'a good but tricky market. Many little nuances that's not easy to figure out even for locals!
@David Krulac is the local expert, wrote a book, and has done a podcast with BP.
There are several local property managers over there, but it's really tricky to deal with. Hersey area is always good because of the medical school. If you decide on investing in HBG, I don't mind sharing with you my short list.
Hello Steve:
I say; "Location, Location, Location". You will find bad deals in your Back Yard, and there are good deals all over the Country. We sometimes have them in our Baton Rouge, Louisiana area market, and surrounding areas. Experience helps but, never let being a Newbie, make you leave Cash on the table.
If it makes money it makes sense. A good property manager (which you will need) if you come upon a good opportunity out of state, will help it make sense. Good property managers ("PM") are PM's that have built good relationships with people who are doing what you want to do,, and there local BBB. Most good PM's have knowledge of good investment opportunities in his market area. Vet the PM, if he checks out. Have him prove on paper, by Photos, Real Estate Brokers, and licensed residential contractors that the deal makes sense.
Sounds like you've made the decision to invest outside of Brooklyn because you feel you're priced out of your own backyard. I felt the same way about my area (SoCal) and decided to invest out of state. That was three years ago. Since then, I've made one SFH work with consistent cash flow, and then another, and now I'm working on my third SFH, and will hopefully pick up another by year's end. Maybe even a duplex/ triplex. You need a plan of attack. Here's what worked for me:
a) Getting over the emotional/ mental hurdle of being an out-of-state investor. Sounds like a weird thing for some folks, but for me, there were lots of fears and scary "what-ifs" that immobilized me, especially as a newbie. How did I get over this? Education. That is to say:
b) I made a list of everything that I didn't understand and things that I feared could contribute to my downside as an investor. The lovely folks at BP have listed some of these things here -- everything from slimy PMs to Mother Nature to investing on the wrong block.
c) I gave myself a reasonable timeline to research all the things on my list of scary/confusing things (I read books, the internet, forums, called realtors, friends, etc.)
d) After my research deadline passed, I pulled the trigger by visiting the area for a weekend (I made arrangements to be hosted/shown around by a local wholesaler who had several properties I was interested in. I found him on the internet.). By the time I got on a plane to come back home, I'd signed a contract with him to pick up my first SFH! Since then, he's opened his REI network to me, and given me some solid advice.
e) Now I learn on the job. Some days I'm crushing it, and some days I'm getting my butt whooped. But I didn't jump in feet first, and I tried my best to minimize my ignorance and risk, so even though I learn lessons, they aren't backbreaking or life-threatening to my business. They're manageable and give me the kind of experience and stress that makes me grow.
Good luck, brother. Here's to your first cash-flowing property and future success.
Thank you for the tips and sharing your own experience. It does make me quite nervous that I will fail and being out of state makes me even more nervous. Aside from that though I am sure there are things I will learn along the way and that I have to just roll with the punches. I know here on BP I can gain tons of knowledge which I have so far over the past couple of months. I think at some point soon I have to pull the trigger though. Only so much you can learn on the website before you have to take action. I am interested in the Philly area/ PA area in general. Multi families is what I would like to invest in. Also you said, Brooklyn and NYC in general is way above my price range.
Brother, what great responses you are offered. I only wish BP existed 30 year ago.... As a contractor and REI-er from when being a flipper/landlord was not very cool I strongly would suggest heeding the advice of almost all the posts here. EDUCATION is key. That does not always mean being an expert at everything but at least having resources to get answers is half the battle.
I do like the post by @Edward Shin
Planning is very important.... Today I create a business plan for every R/E project I become involved with. It allows me to see everything in black and white, affords me the opportunity to see my shortcomings and or concerns so again I can pre-address them. To be honest after creating a plan for some of my projects I find it is necessary to walk away. That does not mean I stop investing it means I take what I learned and move on.
I have many family members scattered throughout PA. Many have been there from generations. From owning the largest breweries in the middle of Pittsburgh to vacation SFH's in the Poconos. Some are huge commercial investors others huge multi family/apt investors.
That said, PA is like many other locations as it offers diversity and opportunity all over the state just as NJ does, NY does and Cali does. You need to create that wish list of yours, educate yourself (avoid analysis paralysis) and test the waters.
Best of luck and let us know how you make out. I am not alone when I say we are rooting for you!
All the Best
Wally
I completely agree with Steve and Andrew. Been there, done that with management company I thought I could trust in Memphis. Hard to monitor out of state. Went through several poor tenants and rehabs. Lost about $40K before pulling the plug and selling. There are good deals right where you are if you take your time and look for them. Also, consider financing larger complex, if possible. You should get better cash flow. And your value isn't tied to comps like 4 and smaller units. Your value can quickly increase by raising rents. The hardest part is your first purchase. Qualify your tenants and you'll have low turnover, stable income and ability to get cash out faster for next purchase.
Success of rental property investment is all about knowing the area well, so you can best predict what is a good deal, the future market trend in that particular area, and what type of potential tenant you will get down the road. Even for surrounding areas we lived for years, sometime takes a lot of time to investigate/drive by / read the news to get a real feel about the area.
It is also about maintain a healthy margin. Out of area you will for sure facing higher operation cost by hiring someone to manage and rely on him to find contractors to maintain/repair.
In some states (e.g., FL), if you don't reside in the state, you pay a higher property tax!
I agree with the couple posts above that probably a lower risk for someone new is to look around your surrounding areas for your first investment. NYC was/is/always be the price for real estate. You will have the first hand experience with all the up/downs as landlord/investor.
Best of luck.
@Account Closed Hi! I am considering buying a short sale single family home in Schertz, TX. What do you think about the area? Can you recommend a good property inspector and property manager in the area? I live in California. Anything I should know about? Thanks
I live in So Cal and I want to emphasize how expensive buying a property close to me can be. I cringe when I read discouraging posts about buying out of state because sometimes that is the only options us newbies have. I don’t have 20% for my first deal in the LA market, but my LA salary goes far in GA, IN and FL. Are there and encouraging ideas on how to source out of state properties and make it work?
@Eric DeVito
I'd read both of these books. they gave me the confidence to pull the trigger.
Your 1st Out of State Rental Property: Easy Guide to Making Money & Building Wealth With Real Estate Investing from Miles Away https://www.amazon.com/dp/B06XCHLKQW/ref=cm_sw_r_cp_apa_i_BJWcEbH872C0R
Out of State: A Practical Guide to Long-Distance Real Estate Investing https://www.amazon.com/dp/B01C68BHU0/ref=cm_sw_r_cp_apa_i_9KWcEbNYJYD2W